|By Arnold M. Knightly, Las Vegas
Review-JournalMcClatchy-Tribune Regional News
Aug. 26, 2008 - If you think the slowing economy has hit casino operators in Las Vegas hard, travel 80 miles northeast to Mesquite.
Black Gaming, operator of three hotel-casinos in the town, reported an operational loss of $15 million for the quarter ended June 30, driving the company to a net loss of $20.3 million.
The latest loss is wider than the $2.6 million net loss posted for the same quarter last year. For the year, the company has posted a loss of $24.3 million.
Chairman and Chief Executive Randy Black Sr. said the company has been put in a "defensive position" and "at some point you just can't cut your way to profitability."
Late last year, Black Gaming, which owns the CasaBlanca, Virgin River and Oasis casinos along Interstate 15, began an aggressive campaign to combat the economic downturn by eliminating departments, reducing management salaries and conducting layoffs.
Black told investors the company cut more than $10.5 million in operating expenses in the first six months of the year, but it hasn't been enough.
"The combination of reduced spending by customers and price reductions we have implemented to remain competitive has impacted our profitability and continued to decrease our (cash flow)," Black said last week in a conference call with investors.
On Aug. 5, Moody's Investors Service downgraded Black Gaming's bond ratings for the second time in three months based on declining market revenues.
Black told investors that he believes an infusion of funds will be necessary next year for the company to meet "liquidity needs." However, enough money should be available to meet working capital requirements, capital expenditures and scheduled interest payments through the end of this year.
In a move to increase revenue, Black Gaming and casino industry veteran Michael Gaughan, owner of South Point, merged their sports book operations Aug. 21, in time for the start of the lucrative football season.
Anthony Toti, an executive who joined Black Gaming late last year after 28 years at Coast Casinos, said combining the operations will let the Mesquite properties increase their limits to $5,000 for college sports and $10,000 for professional sports.
"It's so we can increase our handle and our drop, take bigger bets without so much exposure," said Toti, whose father, Frank Toti, is Gaughan's business partner. "If we're linked between three or four books, it's just easier to take higher limit bets."
The merger will link the sports-book operations, but not the race books, of the three Mesquite properties, South Point and the El Cortez in downtown Las Vegas.
Although Black Gaming continues to adopt changes to help curtail the economic slide, second-quarter net revenues fell 16.2 percent to $36 million for the three months ended June 30, from $43 million a year earlier.
Revenues for the first six months of the year fell 16.2 percent to $74 million from $88.3 million, an Aug. 14 filing with the Securities and Exchange Commission shows.
Casino revenues decreased between April and June, dropping 22.1 percent to $21.2 million from $27.2 million, and 19.6 percent to $45.6 million from $56.7 million.
Gaming revenue in Mesquite slid 12.2 percent to $37.2 million for the quarter, state gaming regulators report.
Black said in May the "other guy" -- the privately owned Eureka casino in Mesquite -- controls approximately 30 percent of the local market and his company needs to "cut into" that share.
Black Gaming's other quarterly revenues dropped, too, including 16 percent in the hotel, 17.2 percent in food and beverage and 14.3 percent in other departments.
The company's aggressive room rate cuts led to a six-month revenue decrease of 19.2 percent to $16 million from $19.8 million.
The company released neither occupancy rates nor daily room rate averages for the quarter. However, a check of room rates on Monday for the upcoming Labor Day weekend found rates ranging from $59 per night to $119 per night.
Prices drop to as low as $29 per night by the middle of next week and $49 per night on Friday, Sept. 5.
"We still see that people are coming to our properties, just not as many people," Black said. "People are spending money, just not as much."
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